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spk00: Hello and welcome to the Tidewater 4th Quarter 2021 Earnings Call and SEER Pacific Offshore Acquisition Announcement. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I'll now hand over to our host, Wes Kocher, Vice President of Finance and Investor Relations. Over to you, Wes.
spk01: Thank you, Alex. Good morning, everyone, and welcome to Tidewater's earnings conference call for the three months ended December 31st, 2021, and also the Esquire Pacific Offshore Acquisition announcement. I'm joined on the call this morning by our president and CEO, Quentin Neen, our chief financial officer, Sam Rubio, our general counsel and corporate secretary, Daniel Hudson, and our vice president of sales and marketing, Piers Middleton. During today's call, we'll make certain statements that are forward-looking and and referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company's actual performance to be materially different from that stated or implied by any comment that we make during today's conference call. Please refer to our most recent form 10-Q for additional details on these factors. This document is available on our website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, March 9th, 2022. Therefore, if you're advised at any time sensitive information may no longer be accurate at the time of any replay. Also, during the call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of GAAP's non-GAAP measures is included in yesterday's press release. And now with that, I'll turn the call over to Quentin. Thank you, Wes.
spk02: Good morning, everyone, and welcome to the fourth quarter 2021 Tidewater Earnings Conference call. Today's call will be slightly different, as in addition to catching you up on the quarter, we will update you on the business combination we announced simultaneously with the earnings release. We've also added a slide deck to go along with the press releases to help us present the synergy potential in this transaction, as well as provide some additional information on the deal. It was linked to the press release, and it's visible to those listening via webcast. Thank you for accommodating this last-minute conference call and for the releasing of two press releases in the wee hours of the night. But we had to find a time that didn't interfere with the NYSE or Hong Kong stock exchanges. As you can appreciate, deals come together when they come together. Also, Sam's been holding on to the earnings release for over a week, so we figured it best just to get all the information out to you in one fell swoop. So thank you, and here goes. I'm pleased to say that this has been another solid quarter for Tidewater and a busy quarter as we had several transaction and events since we last spoke. In addition to the solid quarter, we closed on the debt refinancing that we mentioned on the third quarter earnings conference call. We terminated early the tax benefits preservation plan. We bought out our joint venture partner in Angola, and we announced last night the entering into a definitive agreement to acquire the 51-vessel fleet of Swire Pacific Offshore. Revenue surprised to the upside in the fourth quarter. Revenue was just over $105 million for the quarter, up 14% from the third quarter. The increase is positive, but the trend is even more noteworthy. Usually the seasonal softness in the North Sea offsets any increases in the other areas in the third and fourth quarters, but this year the North Sea was up slightly and the other areas were up nicely, resulting in the 14% increase. Also noteworthy, quarterly revenue has ticked up every quarter this year, a good indication that activity levels are increasing and are becoming expected and accepted by our customers as we proceed past the pandemic-driven pullback and into an increasing offshore activity cycle. Historically, and forgive me as I know most of you have heard this before, but I like to remind people each year, the first quarter is the weakest quarter of the calendar. Like the typical fourth quarter, it's due to weather in the North Sea, but in addition to that, some customers charter on a calendar year basis at the beginning of the year, so you get a bit of charter hire gap in the first quarter. Gross margin also improved during the quarter, up 3.2 percentage points to 32.2% before the non-cash impairment charge. That pushed the annual gross margin up to 29.1%, just shy of our 30% guidance for the year. Our G&A costs for the year included $2 million for the transaction we just announced, and you may recall that G&A had bumped up last quarter due to increased professional fees. Of course, we were necessarily vague last quarter as the deal was in negotiations, but after the deal cost, G&A for the year was $66.6 million, down 10% from the $73.4 million in 2020. Our annualized G&A expense for the first quarter for the fourth quarter was $68.4 million. We're going to talk a bit about G&A going forward in a moment as we get into the transaction with Squire Pacific Offshore. But just as a reminder, the combined 2014 G&A for Tidewater and Gulfmark Standalone, the peak of the last cycle, was $253 million. And the combined G&A at the merger was $143 million, where now it's $66.6 million. We're quite confident in our ability to achieve the estimated G&A synergies in this deal, and we will give you some more details on that later in the call. Free cash flow for the year was $52.2 million, and the bulk of it was earned during the first half of the year. We were free cash flow positive every quarter of the year, and I'm certain you recall that being so is one of our mantras as we go through to a more recovered offshore vessel market. And the reason for the lower free cash flow in the second half of the year is due to vessel reactivations. This is going to be the same for the first half of 2022, as the gross margin from the additional vessel reactivations doesn't overwhelm the cost to reactivate until the second half of 2022. The other mantra that we have been relaying is that all boats are going to be working or sold by the end of 2022. We're on track for achieving that. In addition, 49 of the 51 Swire Pacific offshore vessels are active, and we intend to make sure that 49 remain being fully employed. Vessels in layup cost us $13.7 million in 2021. That's four percentage points of gross margin. Recall that pandemic-related expenses are costing us approximately five percentage points, both op-ex and off-hire impacts. I'll let Sam update you on the new bonds we issued in the fourth quarter and the new revolver in a moment, but we have a few other events that I'll update you on before I hand the call over to Pierce. We terminated early the tax benefits preservation plan in the fourth quarter. You will recall we put it in place just as the pandemic hit to preclude the unnecessary or inadvertent limitation of our tax credits, which are substantial, over $400 million. One of a few key factors in tripping the IRS limitation on these attributes was the acquisition of the Goldmark in the fourth quarter of 2018. The tax limitation determination is a rolling three-year computation, and as soon as the three-year anniversary of that deal occurred, the Board moved to early terminate the plan. We in the Board appreciate that these plans can be seen as not shareholder-friendly, and that is certainly not our disposition. As soon as the probability of tripping the plan was lowered sufficiently, the Board acted to terminate the plan. With regards to the proposed transaction involving Squire Pacific Offshore, it elevates the rolling three-year average naturally, but not enough to concern us. Another transaction that we completed early in the first quarter of 2022 is the acquisition of our partner's 51 interest in Sonatine, our joint venture in Angola. We purchased the outstanding 51% for $11.2 million. Doing so allows us to fully control and operate our business in Angola, allowing us to bring the efficiency improvements we have brought to the rest of Tidewater to Angola. It eliminates the commission we were paying to the joint venture and allows us to consolidate the $10 million in net assets held by that joint venture. This transaction allows us to use the platform in Angola for growth throughout West Africa, including the 25 Swire Pacific Offer vessels located there. Also in the fourth quarter, we initiated the previously mentioned at-the-money stock issuance plan, the ATM plan. We issued no shares under that plan since it was put in place in the fourth quarter. Our intended use for the plan is to repurchase Jones Act warrants. Jones Act warrants, as many of you recall, are the warrants given to foreign equity holders who do not meet the U.S. citizen requirements, so they can't hold regular equity shares due to the Jones Act foreign holder limitation. Our intention with the ATM plan is to create a market for those warrants by issuing new equity shares under the ATM plan in exchange for those warrants. No new net shares are intended to be issued. This plan is to facilitate getting out of the Jones Act warrants. We still have approximately 1.2 million Jones Act warrants remaining from the Tidewater and Gulfmark restructurings, and we intend to issue 8.1 million in the proposed transaction involving Swire Pacific Offshore. If you're holding these warrants and you want to get out, just give us a call. Obviously, we control the issuance and we're mindful of what the market can bear at any given time. We're not interested in adversity impacting the price, but give us a call if you're interested. We're open to working something out. There's a win-win in creating more float with no dilution to equity holders. And last but certainly not least, let me give you an overview of the strategic rationale for the proposed transaction involving Swire Pacific Offshore. Piers and Sam will give you more details. As I just mentioned, we intend to issue 8.1 million Jones Act warrants and 42 million of cash for a total purchase price of about 190 million. The acquisition is debt-free. The value per ship of this transaction is 3.7 million compared to Tidewater's average per ship value of 5.4 million. Our intention is to operate the new vessels under the Tidewater brand. Many investors do not know much about Swire Pacific Offshore, but within the industry, it is known as one of the premier operators. Their safety record is impeccable. Their reputation with clients is stellar. Their vessel fleet is world-class, and their mariners are top-notch. It's a great company, full stop. Tidewater will now own the largest fleet of OSDs in the industry with 174. I'll talk about some of the other strategic merits of the deal in a moment, but we believe the combination of these fleets presents a great opportunity to drive earnings and free cash flow growth and the recovery of the offshore as the recovery in the offshore vessel market continues. Furthermore, we've identified meaningful synergies that we can realize by bringing their operations to our scalable shore-based infrastructure. Squire's fleet of 51 OSVs is primarily located in West Africa, Southeast Asia, and the Middle East. The Squire fleet is comprised of a mix of PSVs and anchor handlers with a nice mix of large vessels within each group. The combined fleet of 174 OSVs is now the largest in the industry. We will have a sizable presence in every major market globally. We've remained weighted towards PSVs, but believe the large anchor handlers acquired from Squire will capitalize on the forecasted improvement in the drilling market. Another compelling aspect of this transaction is not only are we now the largest OSP operator in the space, but the combined fleet is also the youngest in the industry of any large fleet. We believe the combination of size and fleet quality will allow Tidewater to position itself as the OSD operator of choice in every major region globally. We have been proponents of equity-driven relative value transactions, and that's what we have done with Swire. On the market value basis, we are clearly the most investable company in the sector. Furthermore, given the nature of the Jones Act warrant and cash split, we retain our balance sheet strength, which we believe is the prudent approach to running the business, but also allows us the flexibility to pursue additional avenues of growth. If you'll recall, this isn't our first time to approach a sizable M&A transaction. We previously consummated the Tidewater Gulfmark Merchant and developed a strategy to realize synergies from that transaction. We successfully identified and executed on our strategy, realization strategy, and outperformed our initial expectations based on continuous improvement initiatives and optimizing the shore base infrastructure. It's also important to note that that wasn't a one-off event. It's something we focused on over time, and as a result, we're able to achieve 10 consecutive quarters of G&A reductions. I bring this up as I believe we have a playbook that we'll be able to tweak and implement as we approach the new SWIRE transaction. All in, we anticipate $45 million of synergies from the combination of these two businesses. The elimination of duplicate corporate-level expenses is a large portion of the synergies, as well as regional-level source-based costs where our operations overlap, and then operating the expense savings as we leverage existing supplier relationships and operating protocols. When you look at the fleet on a combined go-forward basis, that is excluding any vessel that was sold in 2021 or is currently out for sale, the combined company would have generated 86 million of EBITDA in 2021, and that's with 45 million synergies compared to the Tidewater standalone EBITDA of 35 million. There's no doubt that the synergies we expect to realize from this transaction will be meaningful from an earnings perspective, but we are just excited about the added earnings leverage that the Squire acquisition provides us. Bringing the combined fleet up to 90% utilization would add about $100 million of EBITDA. And in addition, for every $1,500 of day rate increase, all else held constant, EBITDA would increase another $100 million given our substantial operating leverage. To help put this in perspective, to the extent our fleet day rates approach 2014 levels, we generate nearly $700 million of EBITDA. Turning to the regions, as shown by the performance of the Tidewater West Africa region over the past two quarters, this region is rebounding from the pandemic lows This water Pacific offshore fleet combined with our now wholly-owned position in Angola and the sizable infrastructure we have demonstrated to you by our significantly reduced G&A cost structure, we will enable significant synergies on both the administrative and operating cost categories. The high-quality fleet we acquired now positions Tidewater with the largest fleet of active vessels in the region. We believe there's been a flight to quality, which is evident in the working fleet, which we believe will continue to accrue benefits as this market continues to grow over the coming years. Swire Pacific Offshore's current position in the Middle East will be a natural addition to our current operations in that geography. Again, benefits from a sizable shore-based infrastructure footprint and improved operating expense management through economies of scale. Our position in Southeast Asia has been limited to Thailand over the past five years, but Swire has an enviable position in the area, and our Thailand business will touch nicely into their operations. In this area, we will be adding more G&A costs as we will invest in that area's existing infrastructure. Similar to our combined West Africa fleet, we've seen a similar collector quality, and given Swire's vessels are completely utilized, this time speaks to the quality of their fleet. The combined fleet will similarly be the largest active fleet in the region, which positions as well in growing oil throughout the oil and gas market, but also provides us a better platform to participate in a rapidly developing offshore wind market in the region. The 51 vessels for our specific offshore fleet include one seismic vessel. As one vessel in layout and perhaps two additional vessels will be determined to be uneconomic and held for sale. One of the vessels may be sold prior to closing. We'll make a final determination after the closing of the transaction on the number of vessels to be sold with the perspective of an enhanced geographic footprint to deploy the vessels within on top of a swiftly improving market. However, we have acquired a relatively young fleet with an average age of 10.2 years compared to our fleet's current average of 11 years. Importantly, the large PSVs and anchor handlers meaningfully improve our combined age profile in these vessel classes and give us a more compelling offering to our customer and extends the earning profiles of the fleet. The day rate of the Swire fleet in 2021 was 11,913, 15% above our day rate average for 2021 of 10,335. We are excited about the transaction. We believe that the fleet quality, the earnings power, and the preservation of our balance sheet leaves us well-positioned to pursue additional strategic opportunities in the future. The transaction is envisioned to close in 30 to 60 days. And with that, let me turn it over to Piers for an overview of the company's performance by region and some additional commentary on the proposed transaction.
spk03: Thank you, Quentin, and good morning, everyone. Before Sam goes through our numbers in greater detail, I wanted to talk through some of the things we set out to do in 2021, and then we start to see bear fruit in Q4. And what we see happening as we go into 2022, and a little on how we see the Swire-Tidewater combination being able to take advantage of the improving market we're currently in. 2021 was a year of transition for both us and the industry, as we came out of a very tough 2020. And so throughout 2021, we talked about discipline as a key commercial tenant for our teams around the world. Discipline on rates, discipline on reactivations, discipline on utilization, and discipline on contract term. We felt that as a market leader in the industry, we had and have a responsibility to lead the market in all four of these areas. and set out our stall clearly to take advantage of what we see as an improving market in 2022 and 2023 and beyond. On day rates, as Quinton mentioned, we saw incremental improvement quarter over quarter, culminating in a strong revenue bump in Q4. Every region contributed. But where we have really been able to start pushing rates is with our global approach to our large-deck PSV fleet. we anticipated increased global demand for Q4 and into 2022, and were able to be disciplined about reactivating the majority of our remaining large PFCs to meet that demand at the right time, which has meant that we've been able to bring more vessels back into the fleet in Q4, which still increased active utilization by 1% compared to Q3 in 2021. One of the important milestones for Q4 was to get certain customers to start paying full mobilizations and demobilizations again for our vessels, whereas in recent years we've had to compete against less disciplined and desperate competitors who are willing to buy work in order to survive. It would now appear that for the right best-in-class tonnage that Tidewater provides, customers are prepared to pay to mobilize our ships to where their projects are. This isn't across the board yet, but we do expect this trend to continue into 2022 for the larger deck PSVs and higher bollard goal HTSs, which as long as we remain disciplined will translate into higher day rates and increased utilization throughout 2022. By being disciplined and focusing on our flight to quality philosophy, it allows us to plan our reactivations with suppliers and shipyards in 2021. be able to meet demand at the right time as the market improves and then that with a more focused more modern and more hydrated fleet we've not had to take some of the loss-making long-term contracts our competitors have but instead are able to concentrate on shorter-term contracts with first-class customers leaving us with optionality to drive the rates up in 2022 and 2023. With the Swire announcement, we're acquiring a company with a similar disciplined and best-in-class philosophy as we've created at Tidewater. They have brilliant people and a brilliant fleet of modern vessels. And as Quinton mentioned, with the combination of our two fleets, we will create the largest LSV operator in the world today. It is the combination of the types of vessels which is so important, and that will allow us to drive revenue growth in 2022. After close, we will have over 80 large PSVs and 11 200-tonne-plus HTSs in the fleet. And yes, the combination will enhance our competitive position greatly in both West Africa and Asia-Pac. But in a market where customers are starting to pay full mobilisations to get the right vessels in the right locations for their projects, we believe we'll be in the end of the position of having not just the largest OSV fleet and a truly global footprint, but most importantly, the right types of vessels to leverage OSV rates globally. This won't happen overnight, although with $100 on, it might move a bit quicker than anyone thought. But this combined fleet is not only best in class for the market, but the combination of two marquee OSC operators also creates a clear first choice supplier for our customers around the world. And with that, I'll now hand over to Sam to talk through the balance sheet and regions in greater detail.
spk04: Thank you, Pierce. And good morning, everyone. At this time, I would like to take you through our financial results and discuss some key points that make up these results. My discussion will focus primarily on the quarter-to-quarter results of the fourth quarter of 2021 compared to the third quarter of 2021. As previously mentioned by Quentin, we recently announced the entering of a definitive agreement to acquire Swire Pacific Offshore. I will also provide a bit more detail about the acquisition later on the call. As noted on our personal lease file this morning, we reported a net loss for the quarter of $37.9 million, or $0.92 per share. From an operational perspective, we once again showed steady signs of improvement quarter over quarter. Our revenue for the fourth quarter of 2021 was $105.2 million. This was $12.8 million, or approximately 14% increase from the third quarter of 2021. The increase was driven mainly by capacity increase as we added six vessels for our active vessel count in the quarter. In addition, we did see an increase in active utilization of 82.4% compared to 81.6% in the previous quarter. We also saw our average day rate increase 3% to 10,583 per day in the fourth quarter from 10,288 per day in the third quarter. Overall gross margin for the quarter increased nicely to 32% up from 29% in Q3. Vessel operating cost for the quarter was $71.2 million, an increase of $5.8 million from Q3. The increase in overall cost is mainly due to operating six more vessels and the continued reactivation costs associated with these vessels. Reactivation cost for the quarter was approximately $1.3 million. In the fourth quarter of 2021, we reported a $13.5 million impairment charge as we moved five vessels into our asset held for sale category. And we moved one vessel from the asset held for sale category back to the active fleet. We also incurred an affiliate credit loss impairment of $1.4 million related to our Angola JV. We did not sell a vessel in the quarter. For the year, we have sold 19 vessels. and other assets for net proceeds of $34 million and recorded a net loss of $2.9 million on the sale of these assets. Our operating loss of $27 million for the quarter increased by $5.4 million from Q3, due mainly to the increase in the impairment expense and higher operating costs offset somewhat by the increase in revenue. G&A cost for the quarter was $17.6 million, a decrease of $400,000 from Q3. due mainly to lower professional fees. Our annualized G&A expense for the third quarter was $71 million. However, certain charges per quarter are considered one-time charges. In Q4, we incurred $500,000 in professional fees related to the Florida Pacific offshore combination. For the year of 2021, we incurred approximately $2 million in professional fees related to the combination. Taking these charges into effect, our G&A cost for 2021 is $66.6 million, against the target set at the beginning of the year of $68 million. At this time, we would like to provide some information as it relates to this wire-specific offshore combination and what the expectations are now that we have signed a definitive agreement. We expect the closing to occur in the second quarter of 2022. We have already done a lot of work through the diligence process to understand the structure of the company, but we will immediately begin to fine-tune our initial results. Achieving the $45 million of synergies, principally the G&A synergies of $20 million, noted on the investor presentation, will be important. So these next few weeks will be a crucial time as we prepare to begin the integration once the acquisition is complete. I see this process mirroring the same process we went through in the Gulfmark and Tidewater merger. You may recall that the combined G&A run rate of both companies was $143 million at the closing of that transaction. And after the first year, the cost was below $100 million. Our current goal is to achieve $20 million in G&A synergies, which would be significant, considering we anticipate the combined G&A run rate will be slightly over $100 million at closing. I do see us adding G&A costs in Southeast Asia, as we currently have no infrastructure to support this area. The areas where there is overlap, like in the Middle East and Africa, is where the opportunity will be to maximize synergies. We are confident that we will achieve similar results as in our previous combination. Also, as is the case in all combinations, there is a cost associated with them. Through December 31st, 2021, as mentioned previously, we have spent $2 million in professional fees. I see another $4 million in costs to complete the transaction. In addition, we could spend another $8 to $10 million to achieve noted synergies. This will include items such as severance costs, lease termination costs, stay bonuses, and integration performance bonuses. In the third quarter, we incurred $9.9 million in deferred dried-out costs. compared to 10.6 million in Q3. Q4 was a heavy dry dock quarter with 244 dry dock days. Some of the dry docks we had scheduled in the first half of the year are now materializing, and as we continue to reactivate vessels, we see 2022 to be another heavy year. We incurred 27.3 million in dry dock costs for the full year 2021. We anticipate full-year 2022 guide-out costs to be approximately $51 million. In the quarter, we also incurred about $6.4 million in capital expenditures related to the purchase of the battery pack from one of our vessels and the down payment of two tugboats being built for our Angola operation. The full-year spend for 2021 was $9 million. Free cash flow was positive once again this quarter as we achieved $2.9 million of free cash flow. continuing a positive trend of achievement. The free cash flow, even though positive, was lower than prior quarters due primarily to the high dry dock activity. And in the quarter, there were no proceeds from asset sales. Free cash flow for the last four months was $52 million, which is a remarkable achievement considering the challenges that we'll face throughout the year. We expect to continue to generate positive free cash flow in the future. However, reactivation and dry dock costs will impact it over the upcoming next two quarters. On previous calls, we talked a lot about collection challenges related to PEMEX. I'm pleased to say that their AR balance decreased from $16 million at the beginning of the quarter to $8 million at December 31. This is the lowest balance we've seen in quite some time. Our dialogue with them will continue to remain open to ensure the balance can be kept at these levels going forward. In Q4 2019, we began reclassifying vessels on our balance sheet from property and equipment to assets held for sale. At that time, we reclassified 46 vessels. In 2020, we added another 30 vessels, and we sold 53, leaving a balance of 23 at the end of 2020. During the first three quarters of 2021, we sold nine vessels, added two vessels to the category, and reactivated two vessels and transferred them back to the active fleet. Before, we added five vessels to the category and reactivated and transferred one vessel back to the vessel fleet, leaving us with 18 vessels held for sale. The book value for these vessels was $14.4 million at December 31, 2021. On November 16, 2021, we completed an offering of $175 million aggregate principal amount of the 2026 notes. The bonds were privately placed at an issue price of 98.5%. We used the net proceeds from the offering to redeem the 8% senior notes due in 2022 to discharge our Trump's offshore debt and for general corporate purposes, including fees and expenses related to the foregoing actions and recognize an 11.1 million loss on debt extinguishment resulting from cost and expense incurred in connection with this transaction. On November 16th, 2021, we entered into a super senior revolving credit facility agreement with D&B Bank. The credit facility agreement takes precedence over all other debt, if and when drawn. The credit facility agreement matures on November 16th, 2026, and provides 25 million for general working capital purposes. All amounts owned under the credit facility agreement are secured by the same collateral that secures the 2026 notes and such collateral is to be shared in accordance with the priorities established in the inter-creditor agreement. No amounts have been drawn on this credit facility. Also on November 16th, 2021, we also entered into an at-the-market sales agreement pursuant to which we may offer and sell shares from time to time of our common stock, par value of 0.001 per share, having an aggregate offering price of up to $30 million. We set up these financing transactions to be cash flow neutral, and at December 31st, 2021, we had $154.3 million of cash on hand, including $4 million of long-term restricted cash and total liquidity of $179.3 million. You may recall that in the third quarter, we did reclassify on our balance sheet our senior secured notes from non-current to current as the notes matured in August 2022. This was a temporary accounting reclass since the funding of our new senior notes did not occur prior to us filing the third quarter Form 10-Q. Since the offering was completed in November, the reclass has been reversed, reflecting the senior note balance back in long-term debt. I would now like to focus on the performance of the Regents. Our Americas region reported an operating loss of 2.9 million for the quarter, compared to an operating loss of 1.8 million in Q3 2021. The area reported revenue of 27.9 million in Q4, compared to 24.6 million in Q3. The area operated 26 vessels in a quarter, which was an increase of one from Q3. Active utilization for the quarter was 80%, which was unchanged from the prior quarter. Day rates also increased to 14,603 from 13,742 per day in Q3. The increase in operating loss was due primarily to the increase in operating costs related to higher crew costs and operating supplies as vessels were reactivated in the period and vessels did not begin their contracts until early 2022. We also accrued for a legal court claim related to prior years custom charges in Brazil. Our Middle East, Asia-Pacific area reported operating income of $1.1 million compared to operating income of $713,000 in Q3. The area reported revenue of $26.9 million in the current quarter, which was an increase of $1.2 million quarter over quarter. The area operated 37 vessels, which was also the same as Q3. Active utilization did increase by approximately five percentage points to 92% in the quarter, compared to 87.3 in Q3. However, day rates remain constant at $8,580 per day in Q4, compared to $8,623 per day in Q3. The increase in operating income is due to higher revenue, coupled with lower operating costs due to lower operating supplies and freight costs. Our Europe and Mediterranean region reported an operating loss of $4 million in Q4 compared to an operating loss of $2.9 million in Q3. We saw revenue increase by 6% to $22.5 compared to $21.2 million in Q3. The area operated 23 vessels in a quarter, which was an increase of two vessels from Q3, and active utilization decreased a bit to 88.5% compared to 91% in Q3. We did see a slight uptake in day rates at 11,917 per day compared to 11,890 per day in Q3. The increase in operating loss for the quarter was mainly driven by the increase in operating costs due mainly to the reactivation and operation of two additional vessels in the quarter. Our West Africa region reported an operating loss of $1.1 million in Q4 compared to an operating loss of $3.7 million in Q3. The market in the area has improved throughout the year as we have seen revenue increase steadily every quarter this year. Revenue for Q4 was $23.2 million compared to $20.2 million in Q3. The area operated three more vessels in Q4, and active utilization remained flat at 71.4% in Q4 compared to 71.3% in Q3. Day rates increased 6% to 9,052 per day in Q4, from 8,562 per day in Q3. The decrease in operating loss from T3 resulted mainly from the increase in revenue offset somewhat by the increase in operating costs due to the reactivation and operation of three additional vessels in the quarter. We're glad to see quarter over quarter improvement in results for the region. Also subsequent to year end, we purchased our partner's 51% interest in Sonotide, our joint venture in Angola. The purchase was for $11.2 million which will allow us to full control of the business operations in that area. In summary, we're encouraged to see increase in revenue, day rates, and utilization, and we are encouraged to see the continued positive signs in market activity. We reactivated 20 vessels in 2021, which did have an impact in our operation results, and soon we will begin to see the full benefit of those reactivations as revenue will continue to grow and operating costs stabilize to a normal level. Reactivations will continue in 2022, so we will continue to see some additional costs run through the P&L, but this is positive as these reactivations are being done on vessels where contracts have been secured. We remain very encouraged with all the positive signs and look for this to continue in 2022 and beyond. The Swire Pacific offshore acquisition will prove to be an important contributor to growing the value of the company. Swire brings a great team, a high-quality fleet, and a strong commercial position in key markets. We are very excited and eager to work together and create an exciting and world-leading OSB company. Shortly, you will see a form 8K filed for the signed share purchase agreement. On the date of the completion of the acquisition, we will file a Form 8K, including general information related to the close. We then have 75 days to file a Form 8K-A that will include historical target financial statements and pro forma financial information. Our intent is to file a registration statement for the issued warrants as soon as practical after the acquisition, so this information will be included in that filing. With that, I will now turn it back over to Clint.
spk02: Thank you, Sam. Our objective is to generate continuously increasing free cash flow by positioning our vessels geographically to obtain the highest possible day rates, operate them at the most optimal operating cost per vessel, and to do this at the lowest G&A cost per vessel. We're doing this while carefully minding the capital expenditure and working capital investments These objectives are simply stated, but achieving them requires innovative technology, agile change management, and strong financial discipline. The company is free cash flow positive, and our objectives and compensation plans are all geared to increasing free cash flow. And with that, Alex, we will open it up for questions.
spk00: Thank you. We will now begin the Q&A. If you'd like to ask a question, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you can press star 2. Please ensure you're unmuted locally when asking your question. OK, as a reminder, if you'd like to ask a question, that's star 1 on the telephone keypad. Okay, we currently have no questions, so I'll hand back to Quinton for any closing remarks.
spk02: Wonderful. Thank you, Alex. Everyone, thank you for the impromptu conference call. We appreciate you listening in. If you have any questions, please reach out to myself, Sam, or Wes with any. Take care. See you in May. Goodbye.
spk00: Thank you all for joining. You may now disconnect.
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